Page 42 - bne IntelliNews Georgia country report October 2017

the combined amount of no less than $175mn and claim that the government of Georgia violated an agreement on Encouragement and Reciprocal Protection of Investments between Georgia and the Kingdom of the Netherlands, which has been in force since 1999.
“The government of Georgia repeatedly breached its commitments under the [agreement] and subsequent investment agreements, failing to accord fair and equitable treatment and to protect and secure the investments of Gardabani and Silk Road in Georgian energy generation and distribution projects,” Inter RAO said in a statement.
Gardabani is the sole owner of JSC Khrami HPP-1 and JSC Khrami HPP-2, which generate hydropower in Georgia and provide the capital Tbilisi with heat in the winter.
Gardabani acquired these companies from the Georgian State in 2011 on the understanding that the tariffs would be increased in the future to compensate the company from the depreciation of the national currency, the lari, which had fallen by 40% between September 1, 2013 to September 1, 2016.
Georgia changed the rules on tariffs in 2014 and Inter RAO claimed unfairly used the new regulations to avoid hiking tariffs at Gardabani’s request in 2016 and 2017. The company also claims it has not received tax reimbursements it is due from the government.
The row between Silk Road, the 75% owner of JSC Telasi, a major electricity distribution company in Georgia, and the government is very similar.
The company claims that the Georgian government expressly guaranteed a number of rules for adjustment of Telasi tariffs that would have been in the company’s favour, but later reneged on the promises.
“In particular, Georgia agreed to adjust Telasi’s tariffs in the event of an increase in the price of electricity or the depreciation of the lari, and promised Telasi full compensation from the State in the event of adverse legislative change,” Inter RAO said in a statement.
“As with Gardabani, regulatory change in 2014 had a direct and substantial negative effect on the value of Silk Road’s investment in Telasi. The distribution tariff under the new regulations decreased in both 2015 and 2016. In addition, the Georgian authorities interfered with Telasi’s purchase of electricity, in particular making the company buy electricity from a state-owned company at a price nearly ten times higher than the price charged by a private producer. As a result of Georgia’s wrongful conduct, the value of Khrami HPP-1, Khrami HPP-2 and Telasi has been seriously impaired, and Gardabani and Silk Road are entitled to full compensation for the damage caused,” the statement said.
Earlier in August the Georgian National Energy and Water Supply Regulatory Commission (GNERC) was meant to discuss Telasi’s application for a tariffs review, but it failed as the Georgian Labour party blocked the meeting and the police had to be called.
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